Removing a Director under the Companies Act

The Companies Act 2006 contains a right for members of the Company to seek the removal of a director from office by convening a general meeting of its members and passing an ordinary resolution.  This provision is seen as sacrosanct in the Companies Act 2006 – any attempt to exclude this right in the Companies articles of association would be unenforceable.

The procedure begins with the shareholder proposing the removal of the director by giving the company ‘special notice’. Special notice means that the shareholder must give formal notice to the company’s registered office of their intention to propose a resolution to remove the director at least 28 clear days before a general meeting.

The board of directors must then convene a meeting and on receipt of special notice “forthwith send a copy of the notice to the director concerned.” (S169(1) Companies Act 2006).  To convene the meeting, the board must circulate a ‘notice of general meeting’ to the company’s shareholders at least 14 clear days before the general meeting.

The director concerned can make representations in writing to the company and where these are received by the company copies should be circulated to the members of the company before the commencement of the general meeting.

If any representation have not been circulated or received too late for the company to circulate before the meeting then these can be read out at the general meeting.

Albeit an unambiguous process, it is easy to misinterpret the notice periods. ‘clear days’ excludes the day on which a notice is given and the day on which a general meeting is held, and includes working days, weekend days and bank holidays. A predominant factor affecting notice periods will often be the method by which the notices are sent out. If a notice is sent out by first class post, then the ‘postal rule’ states that deemed receipt will be 48 hours after postage. The clear days count will therefore start a day after the notice is delivered to the relevant recipient.

In summary, the statutory process appears fairly clear cut, but there are traps for the unwary; failure to comply with the process or the requisite notice provisions contained in the Companies Act 2006 means that the process may be void.

Whilst this process deals with the removal of a director from the board, it does not, for example deal with the termination rights in any service contract or, as set out in employment law.  In fact, the Companies Act 2006 makes it clear that these provisions shall not  deprive “…a person removed under it of compensation or damages payable to hm in respect of the termination of his appointment as director or of any appointment terminating with that as director…” Advice must also therefore be taken in respect of the service contract and employment law at the same time to safeguard the interests of a company in seeking the removal of a director.